U.S. home sales, jobless claims fuel 3Q growth outlook

U.S. home resales rose to a 10-month high in July, and the number of Americans filing new claims for unemployment benefits fell last week, signaling strength in the economy early in the third quarter.

The growth outlook was further buoyed by a report Thursday showing factory activity in the mid-Atlantic region hit its highest level since March 2011 in August.

The National Association of Realtors said existing home sales increased 2.4 percent to an annual rate of 5.15 million units. That was the highest reading since last September and confounded economists' expectations for a pullback.

Home resales have now increased for four straight months after the housing market recovery stalled in the second half of 2013 following a run-up in mortgage rates.

The numbers allay "fears about a relapse in the housing sector recovery, which until recently appears to have stagnated," said Millan Mulraine, deputy chief economist at TD Securities in New York.

In a separate report, the Labor Department said initial claims for state unemployment benefits fell 14,000 to a seasonally adjusted 298,000 for the week ended Aug. 16. That pointed to a sustained improvement in labor market conditions.

The four-week average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 4,750 to 300,750. But at that level it is consistent with solid job growth, and claims are back to pre-recession levels.

Nonfarm payrolls increased by 209,000 in July, marking the sixth consecutive month that job growth topped 200,000, a sign of strength last seen in 1997. The firming jobs picture appears to have caught policymakers by surprise.

In a third report, financial data firm Markit said its preliminary or "flash" U.S. Manufacturing Purchasing Managers Index rose to 58 this month, the highest since April 2010, from 55.8 in July.